Renzo restaked ETH (ezETH) crashed as low as $750 early Wednesday, trading at a massive discount to wrapped ether (WETH).
The sell-off was likely catalyzed by users looking to reclaim their ETH in low liquidity conditions and large liquidations of ezETH-collateralized positions.
Renzo restaked ETH (ezETH), the liquid restaking token representing a user’s restaked position at Renzo, experienced a brief crash early Wednesday, trading at a massive discount to wrapped ether (WETH) in a low liquidity environment.
Data from DEXscreener show that ezETH fell as low as $750 on Ethereum-based decentralized exchange Uniswap at around 02:45 UTC. The token deviated from its 1:1 peg with WETH, falling to a low of 0.27.
Renzo, the second-largest liquid restaking protocol, uses the Ethereum restaking protocol Eigenlayer to allow users to restake their ether (ETH) in return for Renzo’s ezETH, which users can deploy across other decentralized finance applications to generate an extra yield.
On Tuesday, Renzo released the economic model and airdrop of its native token REZ, which users can receive on May 2. The first season of rewards is scheduled to end on April 26, following which the second season will begin. Users who sell ezETH before April 26 may not receive the airdrop.
According to observers, the sell-off was likely catalyzed by users looking to reclaim their ETH and deploy it in other liquid restaking platforms.
“People sold ezETH on Uniswap, and they had lower liquidity, so the slippage caused the price to drop to below $700, which caused massive liquidation on [generalized leverage protocol] Gearbox and [lending protocol] Morpho,” Hitesh Malviya, founder of crypto analytics platform DYOR, told CoinDesk.
The initial price slide was likely aggravated by the liquidation of loopers or traders who repeatedly ezETH as collateral to borrow ETH to create leverage, according to pseudonymous observer Tommy.
Investor disappointment with the token supply chart was another reason for the price drop, DYOR said.
“Another issue was mainly a goof-up on the token supply chart, which indicated a 65% supply allocation to the team and investors. They later changed and deleted that tweet, which caused a massive hate spree among the community,” Malviya told CoinDesk.
The crash was short-lived, and prices quickly recovered to above $3,000. At press time, ezETH changed hands at $3,172 on Uniswap, while ether traded at $3,281.
Attempts to contact Renzo were unsuccessful.
